California will lead the next housing revolution.

This might seem like a delusional statement given the housing crisis California is facing. Still, for reasons that will become clear, I genuinely believe that it will be no less significant than California’s technology revolution which has changed the face of the world.

I am a Californian by birth and by belief. In my lifetime, companies led by trailblazers like Bill Hewlett and David Packard, Steve Jobs, and Marc Benioff have created all new categories and, more importantly, entirely new ways of thinking about business.

This spirit of innovation has made California a highly desirable place to live and has attracted people from across the world to share in the California dream of a brighter future. Of course, California’s appeal has created a tremendous demand for housing and, in part, driven the cost of homes beyond the reach of most Californians. And demand has not been the only force at work in the cost of housing. California has also struggled with a largely local regulatory environment that has made the building of new homes slow, expensive, and has driven people away from the areas they want to live. These regulations have often had a history of intentionally excluding specific groups from neighborhoods. Some statutes, by design, are to fix a community, in time, with no recognition of the dynamic notion of place. With over 450 municipalities in California, local efforts around housing have often been ineffective or designed to entrench the status quo.

Simultaneously, the construction industry across the country has struggled to meet the needs for housing in almost any market. Construction is one of the only industries with declining productivity over the last 30 years. Construction not only has a lowest investment in R&D of any manufacturing industry, but also a historically low investment into the education of the next generation of building professionals and a lackluster commitment to trade level training. The result is a massive shortage of skilled labor.

The combination of these forces has created a housing crisis in California of epic proportions, with the third-highest ratio of homelessness amongst all the states. More and more people are living in high fire danger zones in search of affordable housing. Commutes from ever-increasing distances are largely driven by low housing availability and unaffordability. This dynamic has led many to declare California a failed state or to claim the end of the California dream. Images of people leaving the state for a brighter future are plentiful, refuting the concept of innovation and appeal that has historically defined the state.

This leads to the question of, “then why be optimistic at all”? Well, I am. There are two forces at work that I believe will transform the California market and lead a housing revolution in the delivery of housing across the entire country.

The first might surprise many skeptics of California politics but, amazingly, since 2016 the state has written, passed, and implemented a string of historical laws that are rewriting the housing landscape in California. Senate Bill 1069 made the permitting of 2nd units (Accessory Dwelling Units, known as ADUs for short) in single-family and multifamily residential zones universally possible. At the same time, it tackled the surrounding regulatory environment to be simpler, less expensive, and with a dramatically shorter timeframe. Not satisfied with the cooperation of local municipalities, the state, in the subsequent three years, made a series of changes to strengthen the effects of the laws and open an even broader range of ADU options. It is estimated that California has the potential for 900,000 ADUs to be built, which in and of itself could be a massive boost to the state's housing needs and a low-impact approach to home building where people want to be by utilizing existing infrastructure.

All of this brought us to 2021, when California passed a series of laws set to redefine the entire housing development landscape in California. At the top of the list are Senate Bill 9 and Assembly Bill 803, which allow for the building of more than one home on a single-family lot and provides the ability to subdivide the lot and sell a unit. Senate Bill 10 and Senate Bill 478 open the possibility of faster development of small urban infill multi-family projects. Senate Bill 7 will continue the provisions of Assembly Bill 900 to expedite the development of multi-family projects under the California Environmental Quality Act (CEQA) and make rules that apply to much smaller projects.

I suspect very few people truly understand how this new landscape sets the state up for remaking housing development. This leads me to my second point of why I am optimistic about California leading the next housing revolution. Out of the sight of many, several companies in California are reinventing the way houses are designed, built, and delivered. These solutions are as diverse as the companies in the market, from the 3D printing of Mighty Homes to the offsite manufacturing of Factory OS. At Etho HAUS, we have our own technology and ideas about how to build better houses faster and for less money. And far from being worried by the other companies in the market, we are invigorated by these smart people that are bringing the California spirit of innovation to an industry that has long lacked fresh thinking.

California has a dire need for housing on a massive scale and, for the first time in generations, the state government is laying the groundwork for more innovative solutions. The companies based here that rise to the challenge will reshape the future of housing construction not just for the state of California but for the entire country — and perhaps beyond.